AMWL | Moving to the Bench | After the Wheels Fall Off, Stop Driving

When we presented our AMWL short on March 5, 2021, we noted that despite some pullback in the stock already, AMWL "should fall to the low teens, and could even end up in the high single digits if the wheels fall off." While the crisis environment of the pandemic had led to higher utilization and physician adoption, in the post pandemic world we were hearing less urgency from providers for any telehealth solution, and consistently negative reviews that categorized Amwell's software as "nothing special" or "not worth the additional cost."  Many had performed well using low cost options like Doximity or Zoom, or with integrated ones like MyChart (Epic),  and were ready to get back to in-person care regardless. We did not believe in the company's ability to sign new systems and plans, expand the number of modules per client, and continue to drive telehealth visits through their platform. 

What's Next

Things have changed. The focal point of the earnings call last week was the company's new age platform, Converge. Amwell laid out their plans to become a technology company armed by a significant investment and successful partnership with Google. As expected from our field checks, a "new, super modern architecture, single cloud-based technology" sounds like a step in the right direction for AMWL to drive module adoption among its existing "more evolved" customers. Followed by comments concerning the platform's ability for global expansion, an improved user experience, and long- term plans for success "next year and beyond," AMWL is making a hard shift in their business. 

The AMG drop off in visit volume has been as we expected, and reflects the general decline telehealth visits.  But there is the additional shift within AMWL users from on-demand to scheduled telehealth visits. The commentary around this shift may also be helpful in determining the drop-off in app downloads that we, and our clients who use other app downloads providers, have been following in the data. Although not as tightly correlated as before, weekly active users (WAU’s) do look to be directionally correct compared to reported AMG visit volume as well. We believe the fall off in app usage may be at least partially tied to the mix shift from on-demand visits to those scheduled through a health plan or system. These are more likely to be scheduled through a local or regional website than the Amwell app, which is a net positive for Amwell, in our view.

Outlook

Following our earnings recap note last week, the stock had fallen to an EV/Sales multiple of 7.5x 2022 estimates, the same multiple we laid out in our original presentation. Even after taking our 2022 revenue estimate down an additional $10MM, material downside on the original thesis looks limited. The opportunity set for AMWL has changed given the introduction/acceleration of the Converge platform, which is expected to begin closing customers in 2H21 and become accretive in 2022.  Given Converge is new and wasn't part of the original thesis, we don't have a strong view on it yet, but are beginning to review.

We can certainly model out scenarios in which we are significantly below the Street in 2022 should churn continue and module adoption stall, but in the shorter term, that looks less likely to emerge and 2022 estimates are unlikely to fall further in the next few months. We are moving AMWL to the Short Bench our short here at $12.08/share or nearly 44% below the initial price when we added it to the Best Ideas Short List on March 5, 2021.  We will add it back as an active short depending on the price, how well the Amwell Tracker updates progress, and incremental information we hear from our expert community on Converge over the coming months.